Corn below $6 seen as farmers plant most since 1936

Acreage should yield 13.863 billion bushels

More Profitable

Guse estimates he can earn $135 an acre on corn this year, compared with $25 if he grew soybeans, based on current prices.

Corn yields in the U.S. will jump 31 percent to 161.5 bushels an acre this year from a 17-year low of 123.4 bushels in 2012, Deere & Co., the world’s largest farm-equipment seller, said on Feb. 13. The average estimate of analysts surveyed by Bloomberg was 155.4 bushels. Deere, based in Moline, Illinois, said prices will drop 25 percent this year to average $5.25.

“We can plant more corn and make more money,” said Chad Blindauer, 41, who farms corn, soybeans, wheat and alfalfa with his father and older brother in Mitchell, South Dakota. “It’s remarkable how well corn performs in dry weather. When farmers see corn yields going up every year and other grain yields essentially stagnate, there is a big incentive to plant more corn.”

Cheaper Feed

A record crop and lower prices would make a “world of difference” in feed costs for livestock producers, which eventually would reduce U.S. retail-beef prices that reached a record in November, said Jim McCann, 67, the owner of Shining Cross Cattle Co. near Miller, Missouri.

“The price is going to come down in the supermarket because our input costs will be lower,” said McCann, whose operation in southwest Missouri buys light-weight steers, feeds them on pasture and corn and then sells them to feedlots.

Production of corn-based ethanol has tumbled to 789,000 barrels a day in the week ended Feb. 8, compared with 920,000 eight months earlier, when the drought began to send grain prices surging, U.S. Department of Energy data show. Weekly output last month was the lowest since June 2010.

Archer-Daniels-Midland Co., the largest U.S. ethanol refiner, has been paying an average premium of 34.6 cents a bushel over futures for delivery this month in Decatur, Illinois, where the company is based, up from 27 cents a year earlier, data compiled by Bloomberg show.

“We can come out of this supply hole very quickly,” said Roger Fray, the executive vice president of grain at the farmer- owned West Central Cooperative in Ralston, Iowa, with 28 locations in the state. “The odds are against a repeat of the severe drought of 2012. Cash prices will likely fall below $4 at harvest.”

Bloomberg News

<< Page 2 of 2

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome